Judge David J. Cowan, Case Number: 17STPB03862, Date: 2023-05-24 Tentative Ruling

TENTATIVE RULING ON MOTION OF DEFENDANTS FOR APPROVAL OF AUDIT REPORT AND ON OBJECTIONS THERETO

In re: Ruth Williamson 2011 Trust dated August 11, 2011, Case No. 17STPB03862 (related to Case Nos. 17STPB02381, YC071970 and YC071983)

Anne Farrell, et al., Petitioners and Plaintiffs, v. Thomas D. Williamson, et al., Respondents and Defendants in these cases

On November 12, 2015, a Utah court, by Judge James Gardener, issued a one-hundred-and-ten- page statement of decision in a case involving the parties herein concerning mismanagement by Thomas Williamson (“Thomas”)[1] of various entities and real property owned by the estate of George B. Williamson and Ruth Williamson and his replacement by Anne Farrell and David Farrell.[2] These entities were owned by the six so-called 101 Trusts - which were established in 2004 for estate and tax planning for each of the Williamsons’ six children. The trusts were the owners of the entities. Thomas was also during the time in question trustee of the 101 Trusts.

On April 10, 2017, Petitioners Anne, David, Katherine Black, Christopher Black, Henry Black and Laura Black (together “Plaintiffs”) filed a petition in this Court to void the purported 2011 Trust (concerning personal assets of the mother of Anne, Katherine and Thomas, Ruth Williamson (held in a 2005 Trust) that are different from those in the 101 Trusts.)

On July 26, 2018, this Court, by Judge Daniel Juarez, entered an order, based upon an ex parte application of Plaintiffs, appointing R. Todd Neilson as the receiver and temporary trustee to take charge of the above-referenced entities, as well as of their books and records, following the sale by Thomas of what are referred to as the Mobile Home Parks in Utah.

On October 29, 2018, Judge Juarez entered an order modifying the receivership, including instructing the Receiver to audit the businesses and prepare a report.

On June 17, 2019, the receiver issued his 77-page audit report attaching 50 exhibits for the period starting August 1, 2011 through the date of the receivership order.

On June 28, 2019, Judge Juarez denied Thomas’s objection to the audit he had brought by ex parte application on June 27, 2019.

On September 23, 2020, Thomas filed an objection to the audit report. It appears these were not filed as part of a motion and no hearing was held.

On October 7, 2020, Judge Juarez granted a motion of the receiver to make certain distributions to beneficiaries, to which Thomas had filed opposition on September 24, 2020.

On January 13, 2022, Judge Juarez granted a motion of the receiver to make certain distributions to beneficiaries, to which Thomas had filed opposition on December 30, 2021.

On March 2, 2022, Judge Juarez granted a motion of the receiver to make certain distributions to beneficiaries.

On July 5, 2022, a different Utah court, by Judge Patrick Corum, issued a thirty-two-page statement of decision following a trial related to claims of elder abuse of Ruth by Thomas, finding against Thomas on one claim.[3]

On July 18, 2023, this Court determined at a hearing related to a motion for further distribution by the receiver that there was a dispute between the parties related to whether the receivership could be terminated in view of issues remaining concerning the audit report: specifically, whether the Court had previously approved it in connection with earlier motions for distributions or if those distributions were “without prejudice” to the Court hearing various objections of Thomas to that report. The Court provided Thomas thirty days to file a motion to address these issues.

On August 16, 2023, Thomas filed a motion for approval of the audit report but also raising four objections to it that he asked the Court to sustain. The objections are as follows:

1. That the receiver had not referenced significant distributions by David to various beneficiaries on August 12, 2011 and September 19, 2011.

2. That the Receiver had failed to comply with Utah law in taking possession of certain Trust property in Utah and therefore had incurred significant undue expense.

3. That Thomas could not be liable as a trustee for any wrongdoing where this action was filed more than one year after he resigned as trustee based on a one-year Utah statute of limitation.

4. That the Receiver expressed improper and prejudicial opinions concerning Thomas that went beyond what the Court had ordered in an audit.

On September 14, 2023, Plaintiffs filed Opposition to the motion. They contend initially that this motion is improper where the Court has implicitly already approved the report in granting two motions for distribution, that is now too late to bring this motion after those distributions have been made, as well as that the Court has approved numerous requests of the receiver for fees and expenses that were premised upon the audit report (overruling objections by Thomas.[4]) Concerning the objections, Plaintiffs’ positions are as follows:

1. That there is no dispute that the receiver did not account for the referenced distributions by David, that in principle there is no objection to the receiver doing so; however, they do object to Thomas receiving any credit therefor in view of his waiver of such claim pursuant to the 2011 Settlement Agreement, as well as his relinquishment of such claim during an earlier proceeding. Hence, there is an issue about whether it makes sense for the receiver to undertake that work, cause greater expense and delay final distributions.

2. That the Utah court upheld the permissibility of the receiver performing his work in Utah, notwithstanding its earlier initial ruling. Thomas’s action in Utah in this regard was dismissed.

3. The audit report does not implicate what statute of limitation may be applicable.

4. The receiver’s stated opinions are permissible conclusions based upon the facts he was able to determine through his audit – that the order instructed him to conduct.

On September 14, 2023, the Receiver filed its position concerning the motion and objections. Over the course of the receivership, he states that he has sold fifteen properties for a total of almost $40 million, that there are no further assets to be sold and that pursuant to court authorization he has made almost $30 million in distributions to beneficiaries. He currently holds just over $7 million, including $2.1 million held back pending Thomas executing an indemnification related to possible tax consequences from the receiver making certain distributions. He also notes he and professionals he has hired have incurred just over $4 million in fees, most of which as been paid pursuant to court authorization.

Further, the Receiver notes that at least the second distribution motion “provides that the underlying distributions were made without prejudice, thereby preserving the rights of the Trusts to continue litigation against one another.”

1. That the Receiver not having been able to investigate the distributions by David was due to the burglary of the office where the records were located and Thomas’s recordkeeping. The Receiver did, however, take these distributions into account.

2. That the expense in the receivership was due to actions by Thomas, as well as reconstruction of records that were taken from the trust office.

4. The court ordered audit report was based upon an objective review of relevant information, including concerning actions by Thomas.

On September 20, 2023, Defendants filed a Reply, together with further supporting declarations.[5] Therein, Thomas acknowledges the Court having ruled on his objections to the fee requests and that he determined it was futile to continue to do so. He also points out that the receiver’s motions clarified what he intended by bringing the motions “without prejudice;” namely, as “to any of the parties’ rights and remedies against each other. Specifically, the Receiver is not taking any position related to the parties’ pending litigation and there is no intent to affect any legal rights, claims or defenses whether related to the receivership property or not.”

This motion is mislabeled as one to approve the audit report. The objections to the report effectively seek an order not approving the report. Hence, for the reasons set forth below, the Court will not deny the motion because that might infer the Court was not approving the report. As also discussed below, however, the Court is not per se approving the audit either: The Motion does not identify pursuant to what statute, rule or other basis there is for the Court to approve or disapprove of the report. The order itself also does not per se state a procedure for its approval, if such was necessary. Hence, the Court looks to other aspects of the order for guidance.

Though not stated in the order, the Court infers that the principal purpose of the audit report was to facilitate the Receiver managing and or liquidating the underlying businesses and assets and in turn to make such distributions to beneficiaries as the Court might authorize – consistent with the reasons advanced for the Court establishing the receivership. Since completing his audit, the Court has heard three motions of the receiver for distributions to the beneficiaries, to two of which Thomas filed opposition. In turn, the receiver has sought authorization for payment of his fees and expenses (to which objections were also filed.) Further, upon completion of all receivership business, the Receiver will file a motion for discharge that will likely require an accounting for the Court’s approval that will presumably be based on his audit.[6] It is in connection with these requests that the order does contemplate that the audit report is relevant: These requests are each governed by an applicable statute pursuant to which the Court may potentially address any deficiencies in the report, by way of objections, to the extent it has not done so already.

Moreover, the order providing for an audit report also does not identify what use, if any, is to be made of the report in connection with the underlying litigation – as appears from the motion to be Thomas’s concern. For example, the order does not state the audit report would be in lieu of any litigation a party may have a right to pursue. Therefore, the Court wishes to avoid approval or disapproval of the report outside the above-referenced statutorily authorized confines as to do so may have the unintended effect of displacing or prejudicing any such litigation.[7]

The Court also now addresses the argument as to whether Judge Juarez already implicitly or explicitly ruled on the objections and or whether Thomas still has an opportunity to assert these objections now. Thomas argues that prior references to Judge Juarez making decisions on distributions as being “without prejudice” means that approval of those distributions did not preclude his continuing to object to the audit. By contrast, Plaintiffs argue that “without prejudice” means only that the Court was not then ruling on any claim Thomas might permissibly later assert.

The Court finds that Judge Juarez intended to overrule the stated objections as they may have pertained to the motions in front of him, since he granted them, but that if there was some other claim that was not then necessary for his decisions that he was presumably not intending to thereby rule those out.[8] The Court finds insufficient evidence that Judge Juarez granted the motions on the basis that he elected to not then address the arguments Thomas was advancing. Indeed, Plaintiffs point out that at least on January 13, 2022 the Court did not “reserve” on the objections but in fact expressly rejected them, stating: “the Receiver has acted within its authority under the Receivership Order.” Hence, this Court may not now belatedly revisit the very significant distributions the Court has already approved to the extent those were premised upon the audit report. To the extent the objections now repeat what Thomas asserted in opposition to those motions, or fee requests, they are untimely and Thomas’s remedy would have been to seek any possible appellate review of those rulings, not to reassert them now that there is a different bench officer assigned to hear this case who was not present to know precisely what the earlier assigned judge may have intended. To the extent there are arguments Thomas did not previously advance, those may still be relevant in connection with the Receiver’s motion for discharge or in connection with the underlying pleadings.

Finally, the extended discussion (and declarations) related to the effect of the October 11, 2011 Settlement Agreement is not before the Court on this motion (except with respect to whether Thomas waived a claim pertaining to the distributions by David.) The effect of the Settlement Agreement on Plaintiffs’ underlying claims is a separate issue that was bifurcated previously to be decided separately at a trial in November of this year. Similarly, the varying lengthy accounts of what led to the appointment of a receiver are also no longer at issue. The Court treats the discussion as background.

The Receiver states he did take the distributions by David into account in his report. Thomas does not show otherwise. Thomas also does not present any evidence in his Reply to rebut Plaintiffs’ claim that he waived any right to distributions by David. Where there would be then no point in the receiver endeavoring to further consider these transactions, given prior efforts, the Court finds this omission from the audit to not be material.

It appears that the initial concern of Judge Kelly, a third judge in Utah handling these matters, related to ancillary jurisdiction of Utah in issuing a temporary restraining order against the receiver, was later satisfied: The Court denied Thomas’s request for a preliminary injunction and granted the receiver’s petition for ancillary jurisdiction. Further, the same Utah court ultimately granted the receiver’s motion to dismiss that action. Thomas’s appeals from that dismissal were also dismissed or abandoned.

Given the foregoing, Thomas’s objection is wholly without basis. It is not clear why Thomas did not disclose this information in asserting this objection, as he should have.

The Court recognizes that the audit covers events - some of which go back to 2011. As discussed above, the audit report is not a substitute for litigation. Whether Thomas has any further liability arising from these events is beyond the scope of the audit. As a result, whether any statute of limitation may be applicable is not now before the Court on this motion solely concerning the audit. Thomas may pursue any defense based on statutes of limitation grounds in such proceedings as he contends it would be applicable (if still permissible.)

The opinion in question regarding unsuccessful investments by Thomas is merely a conclusion the Receiver reached based upon his detailed factual report as to Thomas’s management (which would include investments) that led him to that conclusion. This is not a statement of undue prejudice or bias unrelated to his report. The Receiver is entitled to express his conclusion after conducting that audit. To not summarize those findings would itself be ignoring why the Court issued an audit in the first place. Moreover, the word “dubious” is not overly critical and merely expresses some skepticism – where others might have less diplomatically reached a far worse conclusion.

The Receiver’s conclusion is also well within the scope of his duties under the order because he then had to seek approval for sale or liquidation of assets precisely because it flowed from his determination that “Thomas should not resume financial control or management” (for the reasons stated in his report.)

The Court rejects the opinion of Bryan Moldo, notwithstanding his expertise on receivership issues, that the Receiver’s opinion is unjustified.[9] Given Thomas was the one in charge during the audit period, it obviously made sense for the Receiver to focus primarily on his management to determine the state of the properties in the receivership. Whether others were or were not involved was not the focus of the audit even if that may be in issue at any future trial that determines any liability or further distributions. Most significantly, Moldo does not state why the Receiver’s conclusion is not supported by the underlying information the Receiver provided. The Court finds nothing improper about the Receiver’s relatively innocuous statement and believes counsel is seeking to distract the Court from the important facts the receiver uncovered. The Court concurs that it, not the Receiver, will make the final call on what consequences may arise from the events in question.

For these reasons, the Court overrules each of the objections of Thomas to the audit.

[1] The Court uses first names consistent with prior practice herein, to avoid confusion among family members by using last names, and without intending any disrespect.

[2] This decision was affirmed on appeal.

[3] An appeal from this decision is pending.

[4] The Court takes judicial notice of minute orders filed April 19, 2019, two on May 31, 2019 (concerning different requests), September 9, 2020 and September 28, 2020.

[5] Plaintiffs filed evidentiary objections to the Declaration of Vernon C. Jolley. As discussed below, the Court sustains the objection that the subject of the declaration is irrelevant to the issues on this motion.

[6] Any application of the so-called “family looseness” rule, if there is one, is premature at this point. The Court will need to review the receiver’s final report to determine how any such rule might still be relevant.

[7] That said, the Court had previously inquired whether the parties stipulated to any possible uses of the audit report as a means of expediting any trial by way of an OSC filed May 24, 2023 and heard on July 6, 2023. The Court discharged the OSC after determining it would not be able to do so.

[8] Consistent therewith, the Receiver clarified in his second distribution motion that he was not intending by seeking distributions to seek rulings related to issues independent of the distributions. That said, permitting the distributions may necessarily have impacted the parties’ positions. What impact that might be would presumably be decided at the trial of the underlying petition or related civil complaints. That the Receiver sought to remain neutral does not also mean the Court’s decisions have no effect.

[9] The Court will not now reach the further issue Moldo presents concerning whether the report exceeded the scope of what the Court had authorized. Admittedly, the order is silent on what the report should address other than as concerns the receivership properties. While in hindsight a petition for instructions might have been useful if there was controversy about what the report should encompass, the Court does not have any evidence from the receiver or other parties on this concern or a transcript of what was stated at the hearing. This issue is better addressed as an objection to approval of the receiver’s request for discharge and final approval of his services.